Dropbox, Inc. (DBX) reported a victorious fourth-quarter 2023 with non-GAAP earnings of 50 cents per share, surpassing the Zacks Consensus Estimate by 4.17% and marking a whopping 25% surge year over year.
Revenues surged to $635 million, up 6% year over year, and exceeded the consensus mark by 0.67%.
Annual recurring revenues climbed to $2.523 billion, depicting a year-over-year increase of 0.3%.
Shedding Light on the Quarter
Exiting the fourth quarter of 2023 with 18.12 million paying users, Dropbox experienced a slight sequential decline of approximately 0.05 million. Notwithstanding, the average revenue per paying user soared to $138.83, showing an impressive increment of over $4 compared to the previous year.
The non-GAAP gross margin for the fourth quarter stood at a commendable 82.3%, marking a 20-basis-point upsurge from the previous year.
Price, Consensus, and EPS Surprise
Dropbox, Inc. price-consensus-eps-surprise-chart | Dropbox, Inc. Quote
In the reported quarter, research and development expenses dwindled to $158.9 million, showcasing an 8.5% decline year over year.
Sales & marketing expenses surged 16% year over year to $111.1 million.
General & administrative expenses also saw an 11.4% year-over-year jump to $47.7 million.
The non-GAAP operating margin for the period was a remarkable 32.2%, depicting a substantial 230-basis-point increase year over year.
In the fourth quarter of 2023, DBX recorded a net gain on real estate assets of $158.8 million linked to the partial termination of the lease for its San Francisco corporate headquarters.
Showcasing Fiscal Strength
As of December 31, 2023, Dropbox boasted cash, cash equivalents, and short-term investments amounting to $1.36 billion, indicating growth from $1.31 billion as of September 30, 2023.
The company reported a free cash flow of $190.3 million for the quarter, compared with $246.5 million in the previous quarter, affirming its robust fiscal position.
Future Outlook
For the first quarter of 2024, Dropbox anticipates revenues ranging between $627 million and $630 million, with a projected non-GAAP operating margin of approximately 33%.
Looking ahead to 2024, the company expects revenues to land within the $2.535 billion–$2.55 billion range. At constant currency, it anticipates revenues to fall between $2.532 billion and $2.547 billion.
Dropbox also anticipates a gross margin in the 83-83.5% range for the full year, with the non-GAAP operating margin expected to range between 32-32.5%.
The company projects a free cash flow ranging from $910 million to $950 million.
Insights and Considerations
Despite its compelling performance, Dropbox currently holds a Zacks Rank #3 (Hold).
DBX shares have outpaced the Computer & Technology sector’s growth, registering a 10.4% increase year to date, compared to the sector’s 7.5% growth.
Dell Technologies (DELL), Itron (ITRI), and CrowdStrike (CRWD) are presenting themselves as promising investments within the broader sector. While Dell currently carries a Zacks Rank #2 (Buy), Itron, and CrowdStrike are both sporting a Zacks Rank #1 (Strong Buy). Dell is scheduled to report its fourth-quarter fiscal 2024 results on February 29.
For investors, Itron, set to report its fourth-quarter 2023 results on February 26, and CrowdStrike, set to report its fourth-quarter fiscal 2024 results on March 5, present compelling avenues for potential investment.
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